The Interview

OMERS Ventures wants to collaborate with CPPIB and Teachers’ on tech investments

Damien Steel, managing partner and head of venture capital at OMERS Ventures OMERS

Damien Steel has been keeping a low profile.

A managing partner at OMERS Ventures, he has been the fund’s head of venture for about a year. During that time, the fund, which has $1 billion in assets under management, has announced relatively few tech investments. Meanwhile, the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers’ Pension Plan have launched their own tech pushes.

But Steel says a lot has been going on behind the scenes. The fund has made a number of investments it hasn’t disclosed publicly. It’s also staffing up to focus on Canadian investments and helping tech CEOs in whom it invests collaborate more with chief executives in the rest of OMERS’s $97-billion portfolio. 

In a wide-ranging interview with The Logic, Steel discussed how OMERS is dealing with competition from CPPIB and iNovia in the Valley, and Teachers’ in Toronto and London; nine specific areas in which he wants to invest, ranging from fertility to self-driving cars; and how OMERS real estate deals with Google parent Alphabet are affecting his plans to invest in privacy-focused firms like DuckDuckGo. He also unveils a proposal for how Canadian pension giants can work together.

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Talking Point

In an interview with The Logic, Damien Steel, OMERS Ventures’ head of venture capital, discussed the nine areas in which he’s hoping to invest; why he’s shoring up his Canadian investment arm; and a proposal to cooperate with CPPIB and Teachers’.

This interview has been edited for length and clarity.

It’s been about a year since you became managing partner. A lot has happened. You’ve got a new office in London, a new office in San Francisco. At a high level, how are you feeling about the direction of OMERS Ventures? 

I feel incredible. And that’s after what’s been a year of just Herculean efforts from the whole team here. Opening a new office is not easy. I joke around with friends that opening two in opposite directions is a fool’s move. 

Having a team on the ground in Silicon Valley for our Canadian investments has been a huge asset. Our European team, they’ve been going gangbusters. They’re going to deploy likely over 50 million euros in nine months. We’re essentially ahead of plan there, and it just speaks to the quality of companies. 

We actually just had them all in town yesterday for our CEO summit, where we brought together all our CEOs globally. It was the first time at OMERS that we brought our venture CEOs, and it was incredible. You really saw the benefit, having a diverse group of people, all tackling innovation as it relates to their industries and companies. That, to me, was the proof of this global strategy and really paying dividends.

How many people were there?

There were over 100 people. 

Ontario Teachers’ is both investing in tech firms and putting resources into ensuring portfolio companies can keep up. How are you dealing not just with new investments, but with the potential for existing investments to be disrupted?

I love that Teachers’ and CPP are both launching big innovation platforms. Frankly, I think they’re eight years too late, but better now than never. We’re eight years in at OMERS, and it took us a couple years to get off the ground and really prove that the thesis makes sense. But what we’ve experienced over the last two to four years is that not only do we get great investment returns from the venture asset class—which I think is an important piece of any large portfolio—but we have an impact on the rest of the organization. 

Here’s an example. One of the last investments we made was a company in the Valley called Embark, an autonomous trucking company. When we started talking to that company, our private equity fund owns a trucking company; OMERS owns highways and ports. So we understand that business and we can bring to the table experts in that industry—which, to a young tech founder, those industry veterans are really valuable. 

OMERS has a new San Francisco office, but so do CPPIB and iNovia. I was chatting with a couple of people who were saying that CPPIB is staffing up its San Francisco office with a ton of people really rapidly, whereas at OMERS, it’s Michael Yang and a team of three.

We are soon to be five people.

Why do you have a fraction of their team size? 

I would argue that CPP’s strategy and our strategy [are] fairly different. We’re 100 per cent direct. And we’re looking to do investments between $1 million and $40 million. We have launched a growth equity fund that’s led by Mark Shulgan, who sits in the same office as me, and they’re looking at doing $50 million- to $250 million-sized cheques. That’s the first point. 

The second point is the San Francisco office is an extension of our Toronto team. We have 16 or 17 people in Toronto, four people in San Francisco right now. We all work collectively, and I’d even throw our European team in that mix. We’re sending people from Toronto to target U.S. companies. It’s not just our team of four people today in San Francisco that are trying to cover all of the U.S.

I love that Teachers’ and CPP are both launching innovation platforms. I think they're eight years too late, but better now than never.

What types of companies are you looking to invest in? 

Right now the big ones would be healthtech. Within healthtech, there are three main verticals that we’re looking at: one is musculoskeletal—that’s knee pain, back pain, joint pain, pre- and post-operative care. The second would be mental health. And the third would be fertility. That’s a huge focus. 

The next focus that we’re looking at is proptech [property technology], in both commercial and residential. Two weeks ago, we held our first proptech summit out in San Francisco, where a lot of the leaders and executives from Oxford, as well as a bunch of industry participants all came together. We also spend a lot of time looking at mobility. What I mean by that is autonomous vehicles and electric. Those are three of the big ones. Obviously, we’re always going to look at enterprise software as a service. 

I was a little surprised when Teachers’ told me that they’re not as interested in Silicon Valley. They think there are more opportunities in the tech sector in India and Europe. What are the regions that you’re excited about?

It’s North America and Europe. And while our team in the U.S. is in San Francisco, by no means does that mean every U.S. deal we do will be in San Francisco. We’re looking at a company right now in Chicago. The East Coast, out of Boston and New York—we spend lots of time in those regions. 

We also have a renewed focus on Canada. Over the last year, we’ve done fewer deals in Canada. That’s not because of a lack of interest in Canada. It just happens that the companies that we found that were the best at what they did happened to be elsewhere. 

We’re actually just about to hire a new person; her primary focus is going to be on Canada. We’ve kind of recognized that Canada needs to be its own team. And we’re moving to build up the team to make sure that we never, ever lose touch with our own backyard. 

I was chatting with Dax Dasilva [CEO of Lightspeed] recently about TouchBistro. He said that, despite the recent $158-million investment led by OMERS, he doesn’t see them as a competitor. He’s not worried about them. Should he be?

I think anybody who focuses on restaurants should be very worried about TouchBistro. Clearly, that’s an exceptionally biased comment. Look, I love Dax, and I believe he knows his business better than I do. And if he’s saying that, what that tells me is that restaurants aren’t a core focus for him. 

TouchBistro has been the one announced OMERS Growth Equity investment in recent months, but it’s been a little while since there’s been a new OMERS Ventures investment. What kind of pace are you hoping to hit in 2020? 

When I look out to 2020, I could see us doing something in the neighborhood of somewhere around five or six deals in North America, and probably the same thing in Europe. 

Last year, your predecessor John Ruffolo told The Globe and Mail privacy was a focus for OMERS Ventures, specifically citing DuckDuckGo. You’re managing partner now. Is privacy still a focus? 

Absolutely. I’m an observer on DuckDuckGo’s board. I consider myself lucky to be working with that company. It’s just an incredible company with some views on the future that are quite refreshing. And so yes, I would say that privacy is an area of focus. We haven’t yet completed any real investments in the space since DuckDuckGo, but it is something we look at, not only in its own theme, but across any of the deals that we look into. 

OMERS owns Oxford Properties, which has been doing a number of quite significant real estate deals with Alphabet [Google’s parent company], which is a major competitor to DuckDuckGo. Has that been an issue in any way, reconciling those two investments? 

No, not at all. I think that Oxford probably views Alphabet as a great partner and as a great customer. [Oxford is] one of the top real estate players in the world, and therefore, why wouldn’t they want to work with them? I think it’s very common practice in organizations the size of OMERS to be able to distinguish between the two. It hasn’t really been an issue at all.

Is there anything else you want people to know about where OMERS Ventures is, or where it’s going? 

Everybody keeps asking because the view is that we’ve been quieter in the market. And what I keep telling everybody is don’t let the press fool you. Just because we’re not out there making announcements doesn’t mean we’re not building an incredible team and making incredible investments. And you’ll start hearing about them in the near term.

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Is there any investor out there that you are worried about? Anyone you’re competing against?

No. I promise you that comment doesn’t come from an arrogant place. You could easily sit back and say SoftBank is a danger as we look at later-stage investments.

It drives up valuations. Not that that’s a bad thing, but…

We have portfolio companies that are looking to partner with them. On one hand, it’s challenging. On the other hand, it’s fantastic. I love that CPP and Teachers’ have jumped into this space. I think it’s overdue, and I think they’re going to get tremendous benefit from it. I think we should be partnering more together. I’m meeting with these organizations and I’m trying to convince them we’re all fighting the same fight—which is that innovation matters to our broader organizations. We should be looking at innovation together and trying to get ahead of it because it benefits all of Canada.